Demand Response

Demand response is end-use electric customers reducing their electricity usage in a given time period, or shifting that usage to another time period, in response to a price signal, a financial incentive, an environmental condition or a reliability signal. Demand response is among the Commission’s top energy priorities because it provides numerous economic and environmental benefits for California ratepayers.

Demand response enables utilities to avoid building new power plants that are used only during the peak hours of the day (typically late afternoon to early evening). Building and operating plants that are used only on occasion (also known as “peaker plants”) is expensive, and those costs are eventually passed on to utility ratepayers. Demand response also enables utilities to avoid purchasing high-priced wholesale energy by reducing the demand for that energy at particular times of the day. Wholesale energy costs are eventually passed on to ratepayers so to the extent that those costs can be lowered by demand response, ratepayers will benefit.. Demand response also provides system and local reliability benefits in that they enable utilities to avoid the use of rolling blackouts when there is not enough generation to satisfy demand. Finally demand response provides environmental benefits by enabling the utilities to avoid the use of peaker plants. Peaker plants typically have higher greenhouse gas and other air emissions. Demand response also has the potential to integrate more renewable energy (wind, solar, etc.) into the grid.

Currently, demand response programs are administered by California’s three regulated investor-owned utilities: PG&E, SCE, and SDG&E. The utilities also rely on third-party operators known as ‘aggregators’ or ‘demand response providers’ to enroll customers in certain demand response programs or contracts. Most of the utility demand response programs target large commercial and industrial customers, but there are programs that are designed for residential and small commercial customer participation.

DR Programs

Demand Response programs are the basic point of interaction between customers and Demand Response. There are a variety of residential and non-residential programs offered by PG&E, SCE, and SDG&E. Some utility Demand Response programs are arranged by third-party operators also known as “Aggregators” or “Demand Response Providers.” Demand Response programs offer incentives to elctricity customers to reduce or shift energy consumption. These reductions occur as Demand Response ‘events.’ During these events customers are asked, or are remotely signaled, to shed load due to reasons such as high energy prices and/or system reliability is threatened.

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